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This work discusses a novel framework for simultaneous synthesis of optimal watermarking signal and robust controllers in cyber-physical systems to minimize the loss in performance due to added watermarking signal and to maximize the detection rate of the attack. A general dynamic controller is designed to improve system performance with respect to the $\mathcal H_2$ norm, while a watermarking signal is added to improve security performance concerning the detection rate of replay attacks. The attack model considered in the paper is a replay attack, a natural attack mode when the dynamics of the system is unknown to the attacker. The paper first generalizes the existing result on the detection rate of $χ^2$ detector from a static-LQR controller to a general dynamic controller. The design improvements on both robustness and security fronts are obtained by iteratively solving the convex subsets of the formulated non-convex problem in terms of the controller and watermarking signal. A semi-definite programming optimization is formulated using Linear Matrix Inequality (LMI) results to solve the larger system-level design optimization problem. We highlight the effectiveness of our method over a simplified three-tank chemical system.